Netflix’s hit drama Squid Game is more than just entertainment – it offers plenty of valuable lessons on personal finance. 

Recently, I was invited to speak at a webinar organised by the CPF Board to a group of a few hundred schoolteachers. What piqued my interest was how the Board organised a Squid Game themed webinar and drew lessons from the series that could be applied to financial and retirement planning. According to Netflix, the South Korean drama has taken the world by storm, with US$891 million of impact value generated, making it the streaming site’s biggest series ever.

For some viewers, Squid Game may just be a thrill ride to while away the weekend. For others, it opened their eyes to the deepening household debt crisis affecting the lower and middle classes in South Korea and the widening wealth disparity between the have and have-nots. As a professional in the financial advisory space, Squid Game revealed five financial lessons that we can learn to improve our personal finance.

(Warning: Spoilers ahead)

#1 Stop, Look and Listen

The first game Red Light, Green Light is essentially a game about self-control, i.e. to stop in time and move only when told to do so. To win the game, you must not be caught moving when the light is red, and you must cross the finishing line before the time is up. This creates the temptation to run as fast as possible when the light is green, but if one is not observant, he may be unable to stop in time when the light turns red, thus losing the game.

The lesson here is that when it comes to wealth accumulation, it is always useful to stop, look and listen. There is no need to rush headfirst into get-rich-quick schemes, invest in products you don’t understand, or even take loans to boost your returns. In fact, it was precisely because of margin trading that got one of the characters, Sang-Woo, deep into debt problems.

However, while we shouldn’t rush, we should also not be paralysed by indecision to the point where we are too afraid to move forward. This is because with inflation, the value of your money is being eroded every single day. If you are not actively growing your savings, inflation will eat away at it, making it harder and harder for you to reach the finishing line.

The good news is that with CPF, you’re not starting from scratch. With the contributions you make to your CPF from the first day you started working and the good risk-free interest earned on these savings, you already have a head start in this race.

#2 When Life Gives You Lemons, Make Lemonade

The second game Honeycomb Candy is about navigating around difficulties even when we get the short end of the stick. Without knowing what the game is, players are asked to choose one of four doors denoted by different shapes – triangle, circle, star and umbrella. After they have made their choice, players learn that the shape represents the difficulty of the challenge as they will need to extract the candy in that shape without breaking it.

In this game of life, we can’t always predict the outcome of our decisions or the challenges that will come our way. When things are smooth-sailing, it may seem like we are born under a lucky star but when we run into difficult circumstances, we may feel as if we were placed under a curse. Rather than mull over the fairness of life, focus on your reaction to the circumstance. How do you stand up and overcome the difficulties so that it isn’t game over for you?

This is where financial protection in the form of insurance comes in handy. I thought it was ironic that the hardest challenge was in the shape of an umbrella, but it reminds us of the importance of having the right shelter against life’s unforeseen events such as death, disability or illness that could easily derail our financial plans. Though insurance will not stop life from giving you lemons, it will certainly give you the resources to transform it into lemonade.

In the show, Gi-Hun was unable to get his elderly mother treated in the hospital because he had stopped paying for her healthcare insurance many years ago. Thankfully, with MediShield Life, we are unlikely to find ourselves in such a situation. As coverage is mandatory and the premiums can be paid with our MediSave, we are assured of basic healthcare coverage for large hospital bills should we ever find ourselves or our loved ones in need of such services.

#3 Rely on a Winning Strategy

The third game Tug of War is no stranger to most of us. However, before I watched Squid Game, I always thought that the only way to win this game is through brute strength. Similarly, in the show, when the players were told to group into teams of 10 people, they were quick to find the strongest and bulkiest looking men. It seemed like a lost cause when Gi-Hun and Sang-Woo were left with a ragtag team of disabled men, women and the sole octogenarian.

However, they managed to win the game against a team of 10 strong men, not through sheer strength but by employing a time-tested strategy of anchoring themselves down, frustrating their opponent before reeling in for the win. The lesson here is that when it comes to investing, rather than chase performance in any period to maximise your returns, the wiser thing to do go for reliable and consistent returns by staying invested in a globally diversified portfolio.

Percentage of U.S. large cap equity funds in the U.S. that outperformed the S&P 500 benchmark

Percentage of U.S. large cap equity funds in the U.S. that outperformed the S&P 500 benchmark

Source: S&P Global

According to an annual report by S&P Global, only 39.67% of actively managed funds, where the fund manager picks mis-priced stocks and times the entry and exit from each position based their forecast, was able to outperform the S&P500 benchmark in 2020. If we look at a longer time frame, the result is even more dismal. Over a 20-year period, only 6% of actively managed funds can continuously beat the index. If the professionals cannot do this, what hope is there for the average investor? The answer is simple – stay invested for the long term in a portfolio that represents the world’s market. This is the winning strategy to earn the average market returns of 7-8% p.a., which in my opinion is more than enough for most of us to achieve our goals.

And if you find that you do not have the risk appetite to invest, then the next best thing is to look at how you can optimise your CPF savings through its many schemes to earn the reliable risk-free rates backed by the government.

#4 Don’t Put All Your Marbles in One Bag

In the Marble Game, players are each given a bag of 10 marbles. They are instructed to play any marble related game with their chosen partner. The player that successfully holds on to 20 marbles when the time is up wins. There are many ways to win this game, but I wanted to highlight lessons learnt from two players.

Ali was lucky to win all of Sang-woo’s marbles in a short time. However, Sang-woo not willing to go down without a fight and tricked Ali into running an errand. Before he sent Ali off, he pretended to secure Ali’s bag of marbles around his neck so it wouldn’t get stolen. With a sleight of hand, Sang-woo replaced Ali’s marbles with stones he had picked from the ground, thus winning the game.

While it is heartbreaking to witness betrayal by a close friend or ally, we are reminded not to put all our bets in one place, no matter how familiar or comfortable we are in it. Similarly, when it comes to investing, it is important to diversify your investments broadly across countries, sectors and companies so that you can capture the winners when they appear while minimising your losses.

There's a world of opportunitiy in equities

Source: Dimensional Fund Advisors

In this chart depicting the size of the various capital markets in 2020, what is immediately obvious is that Singapore is nowhere to be seen as it comprises less than 1% of the world’s market capitalisation. Considering that our income is already derived from our work here and a sizeable portion of our assets are committed to our property in Singapore, investing only in Singaporean companies that we are familiar or comfortable with could be exposing us to concentration risks, and severely limiting us from capturing returns in the global markets.

The second player we can learn from is Il-nam, the mysterious old man who is also player no. 1. In his desperation to win the game, Gi-hun took advantage of Il-nam’s dementia to win all his marbles, or so he thought. When he finally counted the marbles in his bag, he realised that he only had 19. Il-nam had shrewdly squirrelled away a marble in his pocket, causing Gi-hun endless frustration. This single marble is like your emergency fund, which you should always set aside before investing. This fund ensures that should you lose your job temporarily, you will not be forced to liquidate your investments prematurely to support your living expenses.

#5 Look Before You LEAP

In the fifth game Cross the Bridge, players had to take turns to leap onto a glass bridge made up of either normal glass or tempered glass. If players landed on a normal glass pane, it would give way, while the tempered glass pane would be able to hold their weight. On the surface, this seemed like a game of chance until we learn that there is a way to differentiate the two types of glass.

The lesson we can pick up from this game is to make informed decisions by learning from the mistakes of those before you or from the wisdom shared by financial gurus who have gone ahead of you. Follow in their footsteps and use an evidence-based approach whether to grow your wealth or build a sustainable stream of income for your retirement. Gi-hun had learnt to keep a marble in his pocket, which came in very useful during this game.

Though MoneyOwl is relatively young in the industry, our approach to financial and investment planning is adapted from our parent company Providend’s two decades of experience and expertise in wealth management, Dimensional Fund Advisor’s 40 years of research in financial science and CPF Board’s more than 65 years of running our national social security system.

In the last episode of the drama, although Gi-hun became very rich, he continued to live like a pauper as he was burdened by the blood money he had come to possess and with no loved ones to share it with. Therein lies the most important life lesson for us. Financial wellness does not come by amassing huge loads of money. It is about using that money to LEAP – to Live Everyday And Purposefully with the people who matter to you.

If you need help with understanding your personal finances and achieving your financial goals, why not speak to a MoneyOwl adviser? Our Comprehensive Financial Planning service includes a health check of your current financial situation as well as actionable tips on how to improve your cash flow, protect your assets and income, fund your children’s education, grow your wealth, optimise your CPF for your retirement and pass assets efficiently onto your heirs.  MoneyOwl’s pool of qualified advisers are all fully salaried, which means they don’t earn on commission. You can rest assured that the advice you get is unbiased, conflict-free and has your best interest at heart. 

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